Introduction
As a Sole Trader or Contractor you will be faced with a choice of two methods of payment. You can either set up a Limited Company or employ the services of an Umbrella Company. If you have chosen to use an Umbrella Company this article will tell you what to look out for, what to ask and ultimately help you choose the company that best suits your needs.

Why use an Umbrella Company?
Some Umbrella Companies offer a free and instant set up, which means you avoid the initial costs of setting up your own Limited Company. You also do not pay unless you are working and there are no leaving fees. If your circumstances change you don't need to complete a tax year or worry about any future tax payments which you would have to cover if closing a Limited Company. If you have a good business idea but maths is not your strong point then an Umbrella Company can deal with all your accounting matters such as payroll, VAT returns and general company accounts. This leaves you free to go and earn money.

Services of an Umbrella Company
You become and employee of the Umbrella Company and are paid a salary plus bonus dependant on your earnings after allowing for expenses. It is important that you fully understand the service you are agreeing to so do not be afraid to ask questions. If the offer is legitimate then the company will be happy to answer your queries.

It is possible to find a company who will give you a personal account manager so that you can be confident that your money is being dealt with in a responsible manner by someone you have built a relationship with. If you have chosen a forward thinking Umbrella Company they will have calculated your tax payments for the whole financial year which means you will be spared a big tax bill at the end of the year, even if your earnings have fluctuated throughout.

Some Umbrella Companies will include Free Public Liability Insurance, Employers Liability Insurance and Professional Liability Insurance which saves you these additional expenses.

If you may need to apply for a loan or mortgage, make sure your Umbrella Company will write reference letters on your behalf without charging you for them.

Fees
Most Umbrella Companies will charge a weekly fee between 15 and 30, and some will not make a charge if you have not earned anything during that weekly period. You are advised to search the market for the best offer. Other Umbrella Companies will charge a percentage of your earnings, but again, this can be negotiated - particularly if you are earning at a higher rate. Make sure you ask about hidden charges before settling with a
company.

Who to choose
As with most businesses, it is possible to register and set up without any qualifications or experience. But when it comes to your money, it is
important that it is handled correctly. Make sure the company you choose has all the relevant documentation. Most Umbrella Companies are run by, or in conjunction with, Chartered Accountants. Such companies will be able to give you the peace of mind you need. If you have asked all the questions and are happy with the answers then you will hopefully have chosen the best company for you.